the staff of the Ridgewood blog
Ridgewood NJ, Walgreens, one of the nation’s largest drugstore chains, surprised Wall Street with stronger-than-expected sales and adjusted profits for its fiscal fourth quarter, thanks to aggressive cost-cutting measures. On Tuesday, the company also revealed plans to close around 1,200 stores over the next three years, including 500 closures in fiscal 2025 alone.
These closures are part of Walgreens’ strategy to stabilize its financial footing, with about a quarter of its 8,700 U.S. locations considered unprofitable. CEO Tim Wentworth explained that these steps will result in a “healthier store base” and allow the company to better respond to evolving consumer behavior and shopping preferences. Despite the widespread closures, Wentworth emphasized that Walgreens aims to employ the majority of workers impacted, although specifics remain unclear.
The company’s stock rose by roughly 10% in premarket trading, signaling investor confidence in Walgreens’ cost-reduction initiatives. The drugstore chain reported Q4 sales of $37.55 billion, a 6% increase compared to the same period last year, beating Wall Street’s expectations of $35.76 billion. Adjusted earnings per share came in at 39 cents, surpassing the 36 cents analysts had projected.
While Walgreens celebrated its improved top-line performance, the company is still grappling with major challenges. These include declining pharmacy reimbursement rates, reduced consumer spending, and hurdles related to its expansion into primary care. Additionally, Walgreens posted a net loss of $3 billion, largely driven by opioid settlement-related expenses and deferred tax asset adjustments.
To navigate these rough waters, Walgreens surpassed its goal of cutting $1 billion in costs for fiscal 2024. The savings came from store closures, employee layoffs, and the implementation of artificial intelligence to streamline its supply chain.
The announcement of the 1,200 store closures marks the first time Walgreens has provided a concrete figure on its plans to downsize by 2027. Despite the challenges, the company’s leadership remains focused on building a leaner, more adaptable business model as it strives to boost profitability and maintain its position in the competitive retail pharmacy landscape.
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